Quote:
Originally Posted by Rainger99
This is interesting. I called my employer today and they told me that all of my options will go DOWN if I don’t take it by December 1. I assumed that the lump sum and all of the other options were invested and paying some interest on a daily or monthly basis.
So I get more money if I cash out now rather than waiting until end of year!
The woman in HR couldn’t explain why it would go down but said it would go down!
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Lump Sum Changes With PBGC Defined Rate for a defined time period usually 3 months
When I retired in 2002, my employer published what the PBGC rate will be for the next 3 month period. With some digging we verified that the HR provided Lump Sum Amount was really a Net Present Value of the retirement payments up to the actuarial expected life expectancy . This was about 83 years and 6 months in 2002. Net Present Value is a standard Application/formula in Excel and other spreadsheets.
I devised a spreadsheet which had input of my birth date, start of employment date, retirement date, PBGC rate and had the spreadsheet estimate the lump sum for retirement. The spreadsheet proved very accurate especially doing estimates of the cases where only difference were the retirement at the current interest rate and retiring a month later with the new PBGC rate. If the rate went up the lump sum went down and you actually lost money by working the extra month even after taking credit for the one month extra salary. If the rate went down your lump sum went up.
The spreadsheet was specific to me, but I devised a generic spreadsheet with a given final salary of 100,000$ so that others could input their specific data and get a result for their situation.
This does not influence your options in the original note but it helps with the decision when to retire in the short term.